Bondholder coalition vows to challenge Seadrill restructuring

Tom Hals

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WILMINGTON, Del, Oct 24 (Reuters) - A lawyer for a global group of investors in offshore drilling company Seadrill Ltd vowed on Tuesday to fight for fair treatment for bondholders unhappy with the company’s proposed debt-cutting plan.

Norway’s Seadrill filed for U.S. Chapter 11 bankruptcy protection in Texas on Sept. 12, with a plan backed by nearly all lenders as well as holders of 40 percent of its bonds.

The plan was backed by major shareholder John Fredriksen, the Norwegian-born shipping billionaire. It will extend by around five years maturities on billions of dollars in loans, intended to give the company breathing space until an industry recovery gains steam.

Under the plan, holders of the company’s $2.3 billion in unsecured bonds would receive 14.3 percent of the stock in the reorganized company.

That plan was “wholly unacceptable” to a group holding around 25 percent of Seadrill’s bonds, a lawyer for the group told a U.S. Bankruptcy judge at a hearing in Wilmington.

The group includes 38 investors from the United States, Europe and Asia, and funds managed by Nordic asset manager DnB Asset Management, Nine Masts Capital Ltd of Hong Kong, and U.S. hedge funds such as Phoenix Investment Adviser LLC.

“They feel they were shut out of the process and were alarmed and surprised by the treatment of the bondholders under the plan,” said Kris Hansen, a lawyer for Stroock & Stroock & Lavan, which was hired by the so-called Ad Hoc Group of Unsecured Noteholders.

“They stand to recover very little compared to those sponsoring the plan, which includes the company’s largest shareholder.”

“The Ad Hoc group intends to actively participate in this process to increase the recovery for disenfranchised holders, which they view themselves as,” he added.

Hansen said he hoped to work with Seadrill.

The company’s lawyers did not respond at the hearing to Hansen’s remarks. Seadrill did not immediately respond to an emailed request for comment.

The group has also hired Rothschild as a financial advisor.

Seadrill is in the process of soliciting proposals that would provide a market test of the Fredriksen-backed plan and the company said in recent court documents it had received two proposals from bondholders.

Hansen said his group was participating in the market testing process, without offering more detail.

The hearing was called to seek approval for a Seadrill proposal to manage its cash across its global business. U.S. Bankruptcy Judge David Jones approved the request over an objection by the U.S. Trustee, a government bankruptcy watchdog. (Reporting by Tom Hals, Editing by Rosalba O’Brien)